China 2017 steel demand seen up 3 to 4% amid infrastructure push : CISA official

Demand for steel in China, the world’s top consumer, is expected to rise 3 to 4 percent this year, with consumption better than expected, a senior official of the China Iron and Steel Association (CISA) said on Wednesday.

“We expect consumption for steel products this year to grow 3 to 4 percent,” said Wang Liqun, vice chairman at CISA.

China’s infrastructure push has spurred steel demand this year, lifting profit margins at producers to the highest in years and steel production to record levels.

Despite the Chinese government’s efforts to cut excess capacity in its bloated steel sector, the country’s output of the building material is forecast to rise to 840 million tons this year from 808 million tons in 2016, according to CISA.

In slashing excess capacity, China has tightened its environmental protection rules as it fights smog, while in the process weeding out smaller steel producers and allowing bigger players to dominate the sector.

Environmental inspection “is a fundamental policy in China and will have impact on prices and production,” said CISA’s Wang.

But Wang said Chinese steel mills should “not over-interpret” the policy implemented by the Ministry of Environmental Protection.

Of the 808 million tons of steel produced last year, only about 36 percent was produced by the top 10 largest steel mills in China, and their portion is expected to increase this year.

Shanghai benchmark steel rebar prices gained nearly 50 percent this year, hitting at 4,194 yuan ($640.31) a ton in early September.